U.S. execs sign off on their books / Corporate filings flood in to SEC by accounting deadline

Published 4:00 am, Thursday, August 15, 2002

Their hands forced by federal regulators and a skeptical public, many of America's top business executives swore in print Wednesday that their companies' financial books were clean.

They swamped the Securities and Exchange Commission with faxed signatures vouching for the accuracy of their reports, many waiting until the last minute to beat the commission's 2:30 p.m. PDT deadline.

The commission, which imposed the new requirement after accounting scandals at Enron and WorldCom shattered investors' confidence, could not say by day's end whether all of the nearly 700 companies required to file by Wednesday had done so. But every Bay Area executive facing the deadline made it, according to a review of company filings conducted by The Chronicle.

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Forced to swear by or revise their numbers, several companies announced Wednesday that they had found errors in past financial reports. But the wholesale wave of restatements that many investors feared never appeared.

"People may feel there may not be as many Enrons and WorldComs out there as the markets feared," said Alan Auerbach, chairman of the economics department at UC Berkeley.

More surprises may yet appear. Executives at another 247 companies were given longer deadlines, because of their financial reporting schedules, to file their statements with the SEC. Of 59 Bay Area companies required to file statements, only 27 needed to fax them by Wednesday afternoon.

The local companies required to file statements by Wednesday included Calpine, Charles Schwab, ChevronTexaco, Providian Financial Corp. and Wells Fargo.

In addition, companies whose verification was due Wednesday may ask for an extension as late as this afternoon, under the SEC's rules.

But many in the financial community saw the smooth passage of Wednesday's deadline as a cause for relief. Among the companies that filed, there was hope that such a show of confidence would ease investors' anxiety after a turbulent year in the markets.

"It's one step in re-establishing credibility," said John Shoven, director of the Stanford Institute for Economic Policy Research and a board member of Cadence Design Systems, which filed its statements to the SEC earlier this week. "This policy has pressured companies to do things that are defensible under close examination, under bright lights."

The new requirement, imposed by the SEC in June, forces the chief executive officers and chief financial officers of nearly 950 companies to attest to the accuracy of their financial reports or explain in writing why they cannot.

The commission has threatened legal action against those whose reports later turn out to be false, although exact penalties have not been specified. Executives must also meet a separate but similar requirement under the corporate accountability law signed by President Bush last month, which mandates multimillion dollar fines and possible jail time for executives who knowingly sign false reports.

Several companies warned Wednesday that their executives would not be able to sign. Most of those announcements, however, came from firms such as energy company Dynegy and cable television provider Adelphia Communications, two firms whose finances were already being audited.

One of the day's few genuine surprises came from the commercial loan and credit card company Household International, whose executives said they would have to restate financial results stretching back to 1994, shaving $386 million off profits during that period. So great was Wall Street's euphoria, however, that after sliding early in the day, the company's stock closed with a slight gain.

AOL Time Warner Inc. warned that it may have to restate the results from three financial deals worth $49 million. The company's executives signed off on their financial results anyway.

As Wednesday's deadline neared, the new requirements drew fire from some accounting experts as an empty exercise. The SEC already had the power to drag companies into court over fraudulent reporting, they noted.

Shoven said, however, that the requirement had at least forced companies to take a second look at how they report financial results. At Cadence, he said, that meant seeking input from more people than might usually get involved in the process and making sure that all pertinent information made it into the reports.

"I do think CEOs and CFOs, even those who had been doing a good job and an honest job all along, were redoubling their efforts to learn what was going on in their companies six or seven levels down," he said.

"That's exactly what it was designed to do. This seems to be a reform that's having the impact, largely, that it's designed to have."